MEXICO CITY, Nov 4 (Reuters) - Leading world economies
pressed the United States on Sunday to act decisively to avert a
rush of spending cuts and tax hikes, warning that the so-called
fiscal cliff is the biggest short-term threat to global growth.

Unless a fractious Congress can move swiftly to reach a deal
after the U.S. elections on Tuesday, about $600 billion in
government spending cuts and higher taxes are set to kick in
from Jan. 1 and could push the U.S. economy back into recession.

"If the United States fails to resolve the fiscal cliff it
would hit the U.S. economy hard as well as the world and the
Japanese economy, so each G20 country will urge the United
States to firmly deal with it," Bank of Japan Governor Masaaki
Shirakawa said before a meeting of Group of 20 finance ministers
and central bankers.

With a close U.S. presidential vote looming on Tuesday, as
well as Congressional elections, there has been a delay in
action to avert the fiscal cliff and there is uncertainty about
whether Congress can reach a deal.

European delegates at the G20 meeting in Mexico City were
particularly keen for details on the U.S. plan, according to
those present at preparatory talks.

Canadian Finance Minister Jim Flaherty said that in terms of
short-term risks to the global economic outlook, the U.S. fiscal
cliff outweighed Europe's debt crisis.

"They may not deal with it until the 11th hour and the 55th
minute but I expect that they'll do it just as they dealt with
their banks in 2008," he told reporters.

South Korean Finance Minister Bahk Jae-wan forecast the
global economy could suffer during the first quarter of 2013
because of uncertainty about the fiscal cliff.

Nonetheless, he too was counting on Congress being able to
find some kind of fix, telling Reuters: "I think compared to the
euro zone crisis the fiscal cliff issue is much easier to
solve."

The euro crisis, which erupted more than two years ago, has
eased after the European Central Bank said in September it was
ready to buy more government debt. But investors are edgy about
when or whether Spain will request an international bailout and
how Greece's deep financial problems can be fixed.

A draft communique being readied for the G20 policymakers
said there were elevated risks facing the global economy,
including Europe's crisis and potential problems in Japan.

"Global growth remains modest and risks remain elevated,
including due to possible delays in the complex implementation
of recent policy announcements in Europe, a potential sharp
fiscal tightening in the United States and Japan, weaker growth
in some emerging markets and additional supply shocks in some
commodity markets," the draft said, according to a G20 source.

The communique will ask advanced economies to strike a
balance between fiscal reforms and economic development, Japan's
Kyodo news agency said. G20 countries will ask Europe to unify
bank supervision, the United States to avoid its fiscal cliff
and Japan to enact a bill to allow it to issue deficit financing
bonds, Kyodo said.

The final communique will be published once talks end on
Monday.

G20 officials said the wording on recent policy
announcements in Europe referred to differences among European
governments over how to build a banking union, considered an
important way to bolster the bloc's shaky financial system,
during 2013. France, Spain and Italy have been frustrated with
German demands for the new scheme.

Few expect major agreements in Mexico with heavyweights such
as U.S. Treasury Secretary Timothy Geithner - expected to stand
down after the U.S. elections - European Central Bank chief
Mario Draghi and top Chinese officials skipping the meeting.

GERMANY PRESSES ON DEBTS, DEFICITS

In a move that could revive tensions with the United States,
Germany was pressing other countries on Sunday for new
commitments on deficit and debt reduction targets beyond 2016.

Germany, the euro zone's biggest economy which has faced
criticism for its insistence on belt-tightening to restore
confidence in the world economy, came to the meeting saying the
United States and Japan shared as much responsibility as Europe
for ensuring global economic stability.

"I think the focus is now increasingly balanced, on both the
U.S. and EU," a euro zone official said. "The difference being
that there is recognition of and support for the EU efforts,
while it is less clear how exactly the U.S. should address its
issue."

Most of the pressure on the United States to explain how the
fiscal cliff can be avoided came from the European Commission,
the executive body of the European Union, and from Germany, a
senior G20 official said.

Policymakers are scrambling to stem a new slowdown in a
global economy still limping after the 2008-09 financial crisis.

The G20's consensus of four years ago, which helped stave
off the risk of a new depression, has given way to deep
differences over issues such as spending to boost growth and the
right pace of belt-tightening to tackle high debt levels.

"It won't be a straight choice between growth or fiscal
rebuilding, such a debate has dangerous aspects," an official
from one G20 country said.

Another official said the G20 would resolve the differences
by focusing more on structural reforms and on fixed targets for
cutting deficits in heavily indebted countries, independently of
the pace of economic growth. That would allow countries such as
Spain or Greece to meet their targets this year and next despite
deeper than expected recessions.

The International Monetary Fund last month cut its forecast
for global growth to 3.6 percent for 2013, citing "familiar"
forces dragging on advanced economies: fiscal consolidation and
a weak financial system.

Officials are concerned about Japan's own version of the
fiscal cliff, a potentially crippling funding shortfall just as
it risks sliding into recession.

U.S. and European officials are likely to come under
pressure from G20 peers for dragging their feet on implementing
the so-called Basel III accords. They would require banks to set
aside more capital - potentially hurting profits - which is one
of the key global responses to the financial crisis.

Countries which fail to introduce the rules could be
punished, a Mexican finance official said.